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by RockyMcNuts
3943 days ago
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in a nutshell, as hopefully others have explained better... before - yuan is undervalued relative to market-clearing price - central banks sells yuan to prevent it from rising too quickly - selling yuan, it acquires dollars in exchange - it builds currency reserves, invests in Treasuries now - yuan is overvalued relative to market-clearing price - central bank buys yuan to prevent it from falling too quickly - buying yuan, it needs to offer dollars in exchange - it sells Treasurys for dollars, sells off currency reserves |
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